Last week, you might have seen that Pason Systems Inc. (TSE:PSI) released its yearly result to the market. The early response was not positive, with shares down 3.6% to CA$12.31 in the past week. It looks like the results were a bit of a negative overall. While revenues of CA$296m were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 4.5% to hit CA$0.63 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
Following the recent earnings report, the consensus fromfive analysts covering Pason Systems expects revenues of CA$280.6m in 2020, implying a noticeable 5.1% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to dip 4.0% to CA$0.60 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of CA$280.8m and earnings per share (EPS) of CA$0.72 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.
The average analyst price target fell 6.5% to CA$16.75, with reduced earnings forecasts clearly tied to a lower valuation estimate. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Pason Systems analyst has a price target of CA$18.00 per share, while the most pessimistic values it at CA$15.50. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. One more thing stood out to us about these estimates, and it's that Pason Systems's decline is expected to slow down, with revenues forecast to fall 5.1% next year, improving on a historical decline of 6.4% a year over the past five years. Compare this against analyst estimates for companies in the wider market, which suggest that revenues (in aggregate) are expected to decline 0.8% next year. So it's pretty clear that, while it does have declining revenues, at least analysts expect Pason Systems to suffer less severely than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Pason Systems. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Pason Systems's revenues are expected to perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Pason Systems's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Pason Systems. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Pason Systems going out to 2021, and you can see them free on our platform here..
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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